Investment Psychology: Sales Ethics, Stock Impact - Starbucks Case

This report delves into investment psychology, examining both ethical sales strategies and the impact of leadership changes on stock performance. It addresses the psychological approaches necessary for successfully selling an investment fund, emphasizing the rational use of information and balancing risk with return. The report also analyzes the potential ethical pitfalls in investment sales and the skills required to navigate them, such as communication, financial reporting, and analytical capabilities. Furthermore, it assesses the impact of Howard Schultz's departure as Starbucks CEO on the company's stock, considering investor reactions and market trends. The analysis includes a review of Starbucks' stock performance relative to its competitors and relevant market indices, highlighting the role of leadership credibility in investor confidence. Desklib offers a wealth of resources, including similar past papers and solved assignments, to aid students in their studies.

Running head: INVESTMENT PSYCHOLOGY
Investment Psychology
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Authors’ Note

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Solution to Question 1:
Psychological approach involved in a bid to attainment of successful deal of selling an
investment fund include rational usage of information and maintaining ideal balance of
particularly both risk as well as return. In essence, the psychological approach includes
carrying out investments based on decisions of investment founded on the premise that prices
of stock tend to be attain heights (Whitten). Since psychic values seem to be comparatively
more significant than intrinsic values, therefore it can be considered to be more profitable to
evaluate behaviour of financiers operational in the market swept by particularly optimism
along with pessimism.
Nevertheless, there are several patterns of trading that are necessarily not steady with rational
use of requisite information and preservation of ideal balance between risk and return of
investments. Intrinsically, it essentially becomes intricate to replicate that a specific
pecuniary decision is basically good else wise bad since that judgement might perhaps
depend on endurance of individuals towards future and to put up with risk. Nonetheless, there
are specific decisions that are evidently mistakes. Particularly, normative themes are founded
on a trade off largely between risk as well as reward forecast that specific individuals will
invest a good amount of the wealth and can hold a large and diversified portfolio of firm’s
shares (Whitten). Nonetheless, a vast body of experiential validation reflects the fact that
activities of investors often deviates from benchmark. In addition to this, there are varied
normative models that talk about individual sponsors that need to trade for rebalancing risk
existent in portfolio otherwise to liquidate diverse assets. Unfairness in different cases of
trading can unavoidably be generated by departure from Bayesian knowledge. In essence,
normative advances can necessarily be undertaken for attaining successive cal if not unethical
facets as regards investment. Even though for maximum financiers agreements, there are
basically ethical investing that are principally controlled to screening systems for pooled

INVESTMENT PSYCHOLOGY
funds, ethical strategies are undertaken for undertaking sale. Additionally, different skills
undertaken during the course, diverse skills that can be expanded include convincing skills
that include interpersonal skills, capability to communicate, reporting financial statements,
and diverse analytical capability (Ahmad). Over and above this, this also comprises of
knowledge regarding software on information technology along with management
experience.
Solution to Question 2:
Assessment of stocks of Starbucks after current pronouncements
Starbucks declared news as regarding standing down of Starbuck’s CEO of particularly
Howard Schultz all through the period 26th June. Evaluation of stock performance of
Starbucks during the past few years replicates underperformance ("“Onward How Starbucks
Fought for Its Life without Losing Its Soul”). Fundamentally, Starbuck’s stock has certainly
been flourishing during the last earlier period. For the most part, during the period 2017,
especially this augmented by around 3.5%, whilst rivals of the business concern namely
Dunkin’ Brands together with McDonald’s has return standing at just about 22.9% and more
or less 41.4%, in that order. It can be hereby observed that Starbuck’s shares have dropped by
about 0.6%. However, during the identical period, shares of the business concern McDonald
have dropped by around 6.9%, whereas during the same time Dunkin’ Brands has without
doubt stayed at a specific point. Primarily, elevated comparative index, such as, explicit
indices S&P 500 Index as well as Consumer Discretionary Select Sector has necessarily
returned roughly 2.8 p.c and -12 p.c respectively ("“Onward How Starbucks Fought for Its
Life without Losing Its Soul”).
Conversely, it can essentially be hereby seen that through the period 4th June, Starbucks was
traded at lesser level of 0.7% after hours of trading. In addition, declaration of CEO quitting

INVESTMENT PSYCHOLOGY
directed towards decrease in stock performance (Ahmad). Again, Howard Schultz can
inevitably be observed as architect of Starbucks and what it has become today. In essence,
Schultz has monitored improvement of the firm from the stage of only a coffee shop that
started functioning in 1971 in Seattle. Additionally, he engaged with Starbucks during the
period 1982 and operated as director of this definite section of functions in conjunction with
marketing stratagems ("“Onward How Starbucks Fought for Its Life without Losing Its
Soul”). In due course, Howard Schultz developed the corporation into mostly a highly
regarded brand that is functioning in more than 28,000 locations internationally. In general
present leadership switch over of Schultz’s directed the way to assumption and speculation
concerning plausible political arrangement (Ahmad). Basically, Schultz has been fervent and
passionate about preceding Presidents. The news concerning giving up of the position of
CEO of Starbucks apathetically exerted impact on financiers along with reactions of investors
and when business was thriving to enhance sales of related stores that sequentially
contributed towards more or less 12% drop off in the firm’s shares over preceding years
("“Onward How Starbucks Fought for Its Life without Losing Its Soul”).

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References
Ahmad, Afzal. "Executive Stock Option Contract Increases Firm Value and Performance: A
Case Study on Starbucks Company." Global Journal of Management And Business
Research (2015).
Whitten, Sarah. "Howard Schultz, Architect Of Modern Starbucks, To Step Down As
Executive Chairman." CNBC. N.p., 2018. Web. 8 June 2018.
"'Onward, With Love': Why Howard Schultz Is Leaving Starbucks." brandchannel:. N.p.,
2018. Web. 8 June 2018.

INVESTMENT PSYCHOLOGY